Case setup (facts offered by interviewer): q Your client is a manufacturer of bicycles q They have been in business for 25 years q They manufacturer and sell three categories of bicycles: Ø Racing bikes: High end, high performance bikes for sophisticated cyclists Ø Mainstream bikes: Durable, but not overly complicated bikes for everyday riders Ø Children’s bikes: Smaller, simpler versions of their mainstream bikes for children q Profits at your client have decreased over the past five years
Question: q What is driving the decline in overall profits? q What recommendations might correct the situation?
Suggested solutions: The first question is to determine what has caused overall profits to decrease. To accomplish this the candidate must first understand what has transpired in each of the three product categories over the past five years during which profitability has slipped. The following are questions and answers that would be provided in an interview scenario.
<!-- CETagParser ~color=#8A2BE2 <font color="#8A2BE2">(案例分析需要你在潜意识里适当运用商业模型。这里面就融入了cost-profit and 4P framework.提醒一下,以下的问题是你要问面试官,他来回答的。你借助面试官的回答,用合理的逻辑来分析和回答他最初的问题。当然,面试者的问题无定式,一下给出的只是个参考的例子)<!-- CETagParser ~/color </font> q What are the client’s margins for a bicycle in each of the three segments? Racing: Cost = $600/unit, Profit=$300/unit 33% Mainstream: Cost = $250/unit, Profit = $75/unit 23% Children’s: Cost = $ 200/unit, Profit = $50/unit 20%
q What has happened to the market size of each of the three segments over the past five years? Racing: Has remained constant at its present size of $300MM Mainstream: Has increased at 2% growth rate per year to its present size of $1.0B Children’s: Has increased at 3% growth rate per year to its present size of $400MM
q What has happened to our client’s market share in each of these segments? Racing: Market share has decreased from 60% to 30% Mainstream: Market share has increased from 0% to 5% Children’s: Market share has increased from 0% to 3%
q Who are the client’s major competitors in each market segment? What has happened to their market share in each segment over the past five years? Racing: There is one main competitor and a host of small firms. Your main competitor has increased market share from 30% to 50% Mainstream: There exist many, large competitors, none of which holds more than 10% of the market Children’s: As in the mainstream segment, there are many competitors, none with more than 10% of the market
The above information provides enough information to put together a picture of why profits have decreased over the past five years : Your client, with a commanding position in a flat market segment (racing), expanded into new segments (mainstream and children’s). As this occurred, market share decreased dramatically in the most lucrative segment (racing), creating an unfavorable mix. The extent to which profits have decreased can be deduced from some quick math : profits have slipped from $60MM five years ago (=60% x $300MM x 33% racing margin) to $44MM today ( = (30% x $300MM x 33% racing margin) + (5% x $1B x 23% mainstream margin) + (3% x $400MM x 20% children’s margin)).
The dramatic decrease in market share in the racing segment is at this point still unexplained. Questions that would help formulate an explanation include: